LG Electronics
November 2002
As a note, this presentation was released as the dates shown and reflected management views as of these dates.
While reviewing this information, the data and information contain certain forward-looking statements that are
subject to known and unknown risks and uncertainties that may cause actual results to differ from those stated
or implied by such statements. These risks and uncertainties include, but are not limited to the risk factors noted
in the Company’s Earnings Releases and the Company’s filings with the Financial Supervisory Commission of
Korea. The Company assumes no obligation or responsibility to update the information provided in the
presentations in correspondence to their respective dates.
Accomplishments to DateAccomplishments to Date
Business Structure Business Structure
LG Micron
LG Innotek
LG. Philips LCD
LG. Philips Displays
LGIBM PC
Overseas Subsidiaries
Air-ConditionerRefrigerator
Washing MachineVacuum Cleaner
Cooking ApplianceOthers
LGE is in four different business lines with two JVs with Philips
Digital Display& Media& Media
Optical StoragePC
MonitorTV
Audio/VisualRecording Media
PDP
Digital Display HomeAppliance
HomeAppliance
MobileHandsetMobile
Handset
LG ElectronicsLG Electronics
LG Electronics Investment(LGEI)
TelecomSystem
Wireless SystemSwitching
& TransmissionData Network
TelecomSystem
CDMA handsetGSM handsetWLL handset
AccomplishmentsAccomplishments
Now LGE is reshaped and more focused and most of all, has much clearer direction
Demerger to focus on main business
Strong growth, high margin Home Appliance division
- CAGR from 1999 to 2002 : LGE 22% vs. Industry 4%
High growth in Handset division with growing market share
- CAGR from 2000 to 2002 : LGE 50% vs. Industry 1%
World top-class PDP maker / Leader in Digital TV development
LG.Philips LCD ahead of competition in 5G TFT-LCD production
Globally securing a top-tier position in major products
(Optical storage, Monitor etc.)
Product Leadership in Key MarketsProduct Leadership in Key Markets
LGE has built up its presence in the global market by taking number one position in many product areas
Global Market Share in 2002(E) Korean Market Share
Air Conditioner *Air Conditioner *Optical Optical StorageStorage
11CRTCRT
No.1No.1No.1
15.4% 21.4% 27.0%
MonitorMonitorCDMA CDMA 18.0%
TFTTFT--LCDLCD22
10.4%17.0%
336.4%
* Based on Package Air conditionerSource: DisplaySearch, LSI, IDC, LGE
Performance HistoryPerformance History
Sales has grown steadily despite the economic turmoil Sales
(Unit : W tril.)
Sales : W18.4 ~ 18.5 tril. (15% ~ 16% yoy growth)
Operating Profits : 6.4~6.5%(more than 50% growth yoy)
Recurring Profits : Dramatic improvement in equity method accounts(W902 bil. loss in 2001)
2002 Target16.6
10.5
6.1
14.8
9.9
4.910.59.9
7.8
2.7
7.3
2.6
1998 1999 2000 2001
Export Domestic
1.8 1.5 1.6
4.2
2
54.5
2.4
2
0.1
0.20.7
Strong sales in US CDMA
2domestic
'01 1H '01 2H '02 1H '02 2H(E)
CDMAexport
GSMExport
4.25.7
6.8
9
(unit: million units)Advance intoEurope and China
Achievement Outlook
Handset Performance and OutlookHandset Performance and OutlookCDMA so far led the growth. GSM will be next growth driver
Full launching of EVDO and WCDMA market in KoreaCDMA : US market to move to color phones,
Demand growth in China and India Color phones to lead robust GSM sales
CDMA in US : Secured #1 supplier position to major operatorGroundbreaking effort to GSM market launched LG Brand
Global Market ShareLGE is now 6th in the global market with 2nd place in the CDMA handset market.
Europe, China, and India are next growth areas.
Global Handset Makers’ Status
Worldwide Handset M/S* Worldwide CDMA Handset M/S
2002 1H20012002 1H2001
1 Samsung 30.9%
2 LG 17.7%
3 Motorola 12.3%
4 Nokia 11.3%
5 Kyocera 10.6%
1 Samsung 23.3%
2 LG 18.9%
3 Motorola 17.3%
4 Kyocera 13.2%
5 Nokia 12.3%
1 Nokia 36.3%
2 Motorola 16.5%
3 Samsung 10.1%
4 Siemens 8.8%
5 SEMC 5.8%
6 LG 3.6%
7 Alcatel 3.2%
8 Kyocera 2.2%
9 Mitsubishi 2.1%
10 NEC 2.1%
1 Nokia 35.6%
2 Motorola 14.9%
3 Samsung 7.3%
4 Siemens 7.3%
5 SEMC 7.1%
6 NEC 2.9%
7 Mitsubishi 2.9%
8 Panasonic 2.7%
9 Alcatel 2.6%
10 LG 2.5%
*Source : Strategy Analytics, August ‘02
2H Expectation - CDMASequential drop in 4Q especially from US expected
87% in domestic market and 24% in export expected to be color phones
Color-Screen Sales Trend
Domestic
Export
0%
13%
24%
'02 2Q '02 3Q '02 4QE
0%
45%
69%
87%
'012Q
'014Q
'022Q
'024QE
0
1,9012,588 2,685
1,900
958
6461,065
1,100
1Q 2Q 3Q 4Q(E) 2002(E)
CDMA Performance in 2002
Export
Domestic
9.1M
3,8M
2.9M3.2M
3.8M
3.1M 12.9M
2H Expectation - GSMGSM business offers great opportunities for LGE to be in a global top-tier handset maker by 2005.
Product Leadership-Export launch from selected “hit” products in Korea-Maximize synergy between GSM and CDMA
business
Performance Overview
(Unit: thousand)Technology leadership - Utilize multimedia technology from Display &
Media division
Enhancing Brand Power - Targeting mid to high market - Utilize high brand power in Europe and China
Total 2.6M units in 2002
LGE’s Strength
1Q 2Q 3Q 4Q(E)
260
480
750
1,100
LGE as a top CDMA makerLGE succeeded in Korea, a toughest test ground for new tech with fastidious customers.LGE has outstanding competitiveness in ever-changing world handset market with itsInnovation, customization and product differentiation capability.
Market - Change in Game Rule LGE’s Competitiveness
• ’97~’00 • Scale Game - Moderate Quality- Low Price
• ’00 ~ • Scale + Exciting Products
- Excellent design- Multi media
[ Service operators ]
[Handset customers]
• Profit aggravation of service operators
• Increasing desire for better design and new tech
Rapid product development time- Short product lead time of 8.5 months- More diverse model portfolio vs. competitors
Vertical integration
- Ability to leverage product development ofDisplay and Media Tech divisions
Innovative and smart designs
Successful customization with major operators
Going ForwardGoing Forward
Diversified Product PortfolioDiversified Product Portfolio
LGE will continue to move up to the value chain by allocating resources into future business
Product Life Cycle
Optical Storage
Handsets
Digital TV
PDP
OLED
Prof
itabi
lity
Home Appliances
Time
Balanced ContributionBalanced Contribution
Operating Profit Up to 3Q 20022001 Operating Profit Breakdown
Handset&System
21%
Appliance50%
Display&Media29%
Handset&System
19%
Appliance62%
Display&Media19%
More balanced income from each sector projected
Major contributor
- GSM / CDMA handset- TV – LCD and PDP TV- Optical Storage- Other Premium Products
Major contributor- Package Air conditioner- Refrigerator- Optical Storage - TV- CDMA handsets
Stronger Balance SheetStronger Balance Sheet
Having strong balance sheet is the first priority of LGE.
LG Electronics Debt (KRW trn)
4.94 3.6 3.1
118%95%
128%97%
50%
2000 2001 After Demerger 3Q 2002 2005E
Debt D/E Ratio
Level
A strong balance sheet is a prerequisite for a global playerFor stable growth and investment, LGE will reduce current 97% gearing level down to 50% level by 2005
Key SummaryKey Summary
With strong growth in GSM and color phones, handsets has contributed to the overall margin improvement
- GSM : Explosive growth (grew 877% YoY, 38% QoQ in 3Q02) with highly improved profitability- Domestic : Product leadership (OLED, EV-DO Phones) / Full product line-up, leading to market share expansion
Ongoing growth of Home Appliance in sales and profitability
- Sales has shown over 20% CAGR since 1998 with more than 10% op margin- Premium products have driven the growth, maintaining market leadership
Level-up in PDP business with a possible turnaround in System business in 2003
- PDP : Visible demand growth with reliable yield improvement- System : Better profitability from W-CMDA sales and business rationalization
Continuing cost innovation and restructuring to improve profitability
- Business rationalization in Monitor, PCB and Telecom System
Thank YouThank You
www.lge.com
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